LPTA AND PROPOSALS ABOVE IGE

If you want the offerors to revise their prices, your only choice is to conduct discussions. That alone is a valid reason to conduct discussions.

Hold discussions with some or all of the offerors -- you can throw some out of the competitive range if you want to. With those offerors that you keep in the competitive range for the purpose of discussions (some or all, a contracting officer or SSA decision), you can do some analysis to see if there are particular places where the offeror prices were higher if you have some price or cost proposal information.

If you have some price or cost proposal information, and if your analysis shows areas where there is a real difference between offeror prices and the Government's estimate, then you might use the approach described in FAR 36.203( c ) where you "identify a specialized task and disclose the associated cost breakdown figures in the Government estimate, but only to the extent deemed necessary to arrive at a fair and reasonable price."

Sometimes contracting officers are reluctant to do hard price negotiations -- but I believe that is an important part of our skill set.

What are you contracting for? I've often led or participated in discussions concerning pricing in competitive acquisitions for construction and design-build contracts but won't go into details unless that is what your acquisition concerns. Suffice to say that you can explore areas of differences in pricing, discuss scope and pricing issues and seek price reductions, clarify and/or revise unclear, incorrect or excessive requirements, seek alternative solutions to meet your requirements, where appropriate. Discussions can be a very effective means of achieving two way exchanges of information.

Krusem, you say the government believes the IGE is correct. However, that does not neccessarily mean that the way the solicititation was structured reflects the assumptions upn which the IGE was developed. Further, there may have been language in the solicitation that would be interpreted in a way by contractors that is inconsistent with what the government wanted. Have you looked at the solictation and technical proposals from this perspective?

Just because it is over the IGE does not mean the price isn't fair and reasonable. I cannot imagine a scenario in which the Government could be wrong on its estimate? We never try to buy more than we can afford right?

The recourse the PCO has is to make a determination if the price is fair and reasonable or not via price analysis, FAR 15.404-1( - (competitive quotes, comparison to IGE, market research, historical pricing, catalogue prices, etc.)...Also verbatim from Appendix A, para A.5. of the DoD source selection Procedures dated 4 March 2011 "...Although in exceptional cases when the determination of fair and reasonable price requires additional information, the PCO may conduct a cost analysis to support the determination of whether the proposed price is fair and reasonable."

So why not enter into discussions? Tell the contractors in the comp range their price is high in comparison to the IGE. Then request a revised proposal that includes a cost breakdown to mirror the format of the IGE and compare the costs. You get better pricing, and can identify where the high prices are coming from and if any scope clarifications are needed.

I advocate including language reserving the right to request price breakdown information (information other than cost or pricing data) in RFP's, if necessary to determine that prices are fair and reasonable and teach including wording to that effect in my design-build construction class.

However, even if you dont reserve the right, I believe that you can request information other than cost or pricing data, if necessary to determine that a price is fair and reasonable. See 15.402 (a )(1) and 15.403-1 (b ) , and 15.403-3.

I don't necessarily agree with hutch_05's suggestion that you "[t]ell the contractors in the comp range their price is high in comparison to the IGE. Then request a revised proposal that includes a cost breakdown..." -- at least for construction or design-build acquisitions. Hutch might be right on for supply or services acquisitions, especially for commercial items that are widely sold. However, I would ask for "price" breakdowns, not detailed "cost" breakdowns.

You may not have enough information at this point to request revised proposals. I would advise asking for the information and provide a higher level outline pricing format that you can use to compare proposal price breakdowns with each other and with the IGE to explore areas of price differences before conducting discussions. This will usually allow us to pinpoint areas of significant differences. Then conduct discussions to try to determine the reasons for the price differences. I have found situations where poorly written or ambiguous specs caused confusion, specs were written around one supplier or manufacturer or where subs or primes have thrown in contingencies due to something that we can solve or change. Sometimes, we have unreasonable requirements that could be modified. We have even found alternate manufacturers that would meet our requirements, which busted up some proprietary pricing by suppliers (the original supplier to a prime construction contractor reduced their price by several million dollars in one case) . This is LPTA. Therefore, proposers will often sharpen their pencils due to competition. Inflated pricing may be less likely than misunderstandings, or prescriptive specs, etc.in such cases.

It often ticks off proposers when the government simply requests better pricing under the assumption that our estimate is correct when we haven't bothered to find out why the industry pricing is higher than our estimate. Plus, I like discussions anyway.

The question was general in nature, but for the purposes of our discussion, you can consider it to be plain design bid build construction using FAR 15 procedures.

The reason I asked this question is because it is not uncommon for some proposals to come in that exceed our IGE, especially some of our smaller in house projects that require local estimation.

I have always opened up discussions to negotiate price, but the other day when researching LPTA, I ran across a discussion from a 2010 post by mskity where Vern indicated that asking a contractor to lower their price (sharpen pencil) is unethical, and that made me question myself.

My assumption is that he said it was unethical due to the fact that the government is asking a contractor to further reduce an already fair and reasonable price happens to exceed the budget, not because it exceeds the government's estimate, and is therefore considered to be unreasonable.

In sum, I guess my question was really whether or not it is acceptable to establish a competitive range and conduct negotiations with technically acceptable offerors in an effort to bring their proposal cost below the government's estimate.

Now that we are on the subject, what about technically unacceptable proposals? I have read advice on wifcon that says unacceptable proposals can be included in the range if the government can help them become acceptable. Is this allowable and/or recommended when using LPTA?

Thanks everyone!

In sum, I guess my question was really whether or not it is acceptable to establish a competitive range and conduct negotiations with technically acceptable offerors in an effort to bring their proposal cost below the government's estimate.

If the sole purpose of the negotiations is to bring the proposal cost below the government's estimate, then the answer to the question is a resounding No!

But if the question were: Is it acceptable to establish a competitive range and conduct negotiations with technically acceptable offerors in an effort to reach agreement on a fair and reasonable price, then the answer would be Yes, of course.

Keep in mind, however, that you have conducted a competition and received competitive prices. So why would you think that the prices are not fair and reasonable?

If you have enough money but are concerned because the prices exceed a government estimate that you think is sound you should conduct discussions to see if you can find out the reason for the disparities. If the only problem with the prices is that you don't have enough money, then get more or amend the RFP to make the requirement more affordable.

Thank you for the response Vern.

I believe you and I are speaking the same language on this topic - for the most part. What you are saying, if I am understanding you correctly, is that just because the government's estimate leads us believe that we have unreasonable offers, in terms of cost, it should be the results of our competition that tell us this.

Is the fact that they are comparable in terms of cost reason enough to determine that they are fair and reasonable, and thus not open discussions? My personal logic would say yes, but it would also say that if they are all above the government's estimate, it is worth opening discussing and performing a bit of fact finding to ensure that they are in fact fair and reasonable.

Is that where you were attempting to lead me Vern?

It seems, at least here in the ANG, that we bust our estimates quite often and then want to automatically assume the offerors are unreasonable and not us. We are quick to open discussions for the purpose of beating up their price instead of trying to figure out the basis for that difference in cost.

The government estimate is not necessarily a good standard for fair and reasonable. Generally, competitive prices are a better standard. But if there are large disparities between the government estimate and the competitively bid prices, high or low, then you should try to find out why. It could indicate that there was something wrong with the solicitation. It may not have described the requirement on which the government estimate was based. The mere fact that competitive prices are higher than the government estimate is not, in my opinion, grounds for trying to negotiate reductions in the prices offered. It strikes me as arbitrary, especially if the prices are closely grouped.

You don't conduct discussions until you determine where the differences are. Until then you don't have anything to discuss.

Joel:

I disagree entirely.That's wrong. You can conduct discussions to inquire, to ascertain, to find things out and to determine the nature and source of differences. Discussions may be the only way to get to the bottom of things. In other words, you can conduct discussions in order to, let's see, DISCUSS!

See Ceres Environmental Services, inc. v. U.S., 97 Fed. Cl. 277 (March 2011):

In explaining the purpose of the final round of discussions, the SSEB's Re–Evaluation Report stated that “[t]he primary focus of [the latest] round of discussions was to attempt to determine the reasonableness of the latest proposed prices for Section B.” CAR 1011. According to the Report, “the SSA concurred with the decision to enter into discussions to obtain more information to help determine [section B] price reasonableness.”

See, also, Citywide Managing Services of Port Washington, Inc., B- 281287.12, 2001 CPD P 6, 2000:

In pertinent part, the discussions with all offerors identified CLIN prices in their proposals that appeared “substantially higher" and others that appeared “substantially below” the government estimate and/or prices of other offerors, and requested offerors to verify their prices and understanding of the scope of work.

Vern, your response at #11 was put very well.

I think another thing that helped to ruin me on this topic was our use of 8(a) direct awards through the Partnership Agreement with the SBA. In these procurements we generally rely heavily upon the government estimate during negotiations, and that mentality has carried over into our competitive procurements. My organization should rely more heavily upon competition and less upon the government estimate going forward.

Based upon what I have read, when discussions are opened for the purpose of determining the reasonableness of the offeror's proposed prices, the negotiation objectives should be more fact-finding in nature, and not an attempt to obtain price reductions. Depending on what is discovered during discussions would determine whether or not you do in fact ask for a price reduction or issue and amendment to address shortcomings in the solicitation.

The two examples that you provided are a great help as well. I will have to remember them for future reference.

Based upon what I have read, when discussions are opened for the purpose of determining the reasonableness of the offeror's proposed prices, the negotiation objectives should be more fact-finding in nature, and not an attempt to obtain price reductions. Depending on what is discovered during discussions would determine whether or not you do in fact ask for a price reduction or issue and amendment to address shortcomings in the solicitation.

Exactly. You conduct discussions when you need information in order to understand a proposal and that might affect your assessment of it. Trying to get that information through "clarification" is risky, because the GAO's case law about the distinctions between clarification and discussion is a mess. If the information you get indicates that prices are unreasonably high or unrealistically low you should notify the offeror and give it the opportunity to make appropriate adjustments.

Exactly. You conduct discussions when you need information in order to understand a proposal and that might affect your assessment of it. Trying to get that information through "clarification" is risky, because the GAO's case law about the distinctions between clarification and discussion is a mess.

I don't disagree with the idea of conducting discussions to determine if pricing is unreasonable. However, I do suggest reserving the right in the RFP to ask for price breakdown information if necessary to help the government evaluate price proposals. This isnt discussions because we don't allow the proposers to revise their proposals. We have done this for over 20 years without a problem on hundreds of solicitations.

We began in the late 1980's asking for a high level price breakdown with the proposals but found that the information often didnt make sense. During discussions with a couple of the proposers' reps, they indicated that they dont have any problem with furnishing such information. However, they werenty in a position to accurately break down the final numbers prior to proposal submission because they were still finaalizing the final pricing up to the last minute. They suggested allowing proposers a couple of days to break down the information and provide it. We then asked in the proposal for the price breakdown information to be provided within three working days after the closing date for proposal receipt. That worked great for us. However, on many occassions we didnt need the information and were making proposers go to extra effort for no purpose. We then decided to instead reserve the right to ask for the information, if necessary to help evaluate the price proposals. We ask for the information when there are questions concerning pricing. This has worked very well in helping to determine if we need to conduct price discussions.

This technique has greatly increased our ability to prepare for price discussions ahead of time. We don't always decide to go to discussions.

With this information, we can first decide if we need to conduct discussions and focus on those areas prior to discussions, instead of dragging proposers in, wasting everyone's time trying to find the areas where we needed more information to evaluate proposal reasonableness. I've been in those kind of discussions, which sometimes make us look like idiots in the eyes of the proposers. It was embarassing.

Krusem asked "...what recourse does a contracting officer have, if any, when all proposals exceed the government's estimate, and the government believes its estimate is valid (correctly priced)." I think that the method I described has worked very well for us over the years. I'm not aware of any legal issues that have arisen using the method. Our attorney's at first were concerned that this was some type of split proposal, but agreed that it was okay as long as we don't allow proposal price revisions with the breakdown information. The proposers have never complained to my knowedge and the techniques have been effective.

Who is the "we" who has done it for 20 years? What language do you use in your solicitations? Is the procedure described in an agency regulation, policy issuance, or manual?

Here is current wording excerpted from Section 00 22 20, "PHASE 2 DESIGN-BUILD SELECTION PROCEDURES AND BASIS OF AWARD" in the Army Corps of Engineers' Model RFP. The Model RFP was developed in 2006 for use on Design-Build contracts for Army MILCON projects as part of the $60 Billion plus MILCON Transformation/BRAC Program. This program involved up to 6 times the normal Army MILCON workload for several fiscal years.

A representative Corps-Wide acquisition committee (including Contracting, Attorneys and Engineers) developed this Section of the RFP. It was vetted through Contracting and legal channels, with input from industry in the 2005-2006 timeframe. The Model RFP was directed for use on all USACE Army D-B projects for consistency. I can't vouch that it has been used on all projects but it has been used on hundreds of D-B projects since 2006. We used similar wording as below in Mobile District for D-B and for straight construction RFP's as far back as 1992. Similar wording has been used in the USACE Design-Build PROSPECT Course "Design-Build Construction" since its inception in 1996.

The Model RFP has optional versions for One Step D-B under 10 USC 2862, Two-Phase (FAR 36.3), a Two-Phase version for initial award of Multiple Award ID/IQ (MATOC) Base Contracts and a version for follow-on task orders on MATOC's.

I've not heard any feedback that there are problems with this approach to reserving the right to request price breakdown information. We have a feedback system for lessons learned and a Criteria Change Request program. I have been a member of the team that developed and maintains the Model RFP since 2005.

"8.1.1.1 Submission Requirements:

Submit the properly filled out and executed SF 1442, along with the CLIN Schedule, containing proposed line item and total pricing, as well as the proposed contract duration. See instructions in Section 00 21 00, “Instructions to Offerors”.

Supplemental Price Breakdown. If deemed necessary to evaluate the price proposals, the Government’s will request a Phase 2 price breakdown of the Contract Line items in a sealed envelope marked “Phase 2 Price Breakdown Information”, in Excel format. The Government will provide details on where and how to send the breakdown. This information will not be needed sooner than three working days after the proposal submission due date. This information may be required for the initial Phase 2 proposal and, if requested, for any revised proposals. This information is not an opportunity for an Offeror to revise its non-price or price proposal."

"8.2.2.2 Evaluation Criteria:

... If deemed necessary, the supplemental price breakdown information will be used to assist the Government in performing the price evaluations described above."

In my opinion, there is no value added to the source selection or task order evaluation process by deciding to conduct discussions to see if there really is a need to conduct further pricing discussions. It adds time and extra effort to the process, which may not be necessary. Asking for information, in essence as clarifications, allows the government to focus attention on those areas that stand out as significant differences between offerors/proposers and between offerors/propers and the government's estimate. Sometimes we discover busts in the IGE and sometimes we discover problems with the government's requirements. If we need to conduct discussions, we are are more informed and more prepared to explore those areas. I've sat in on discussions where this wasn't done and the government team looked like dummies. Then extra time was spent asking for and getting the information necessary to evaluate and continue discussions.

The idea of reserving the right to ask for additional information if needed sounds okay, but I have some questions.

1. What if any price information do you request with initial proposals?

2. What kind of supplemental information do you ask for?

3. Do you ask for it from every offeror or only some? How do you decide from whom to ask for it?

4. How long do you give offerors to submit the supplemental information? Do you expect that they already have it because they developed it to come up with their prices? If so, why not ask for it with initial proposals?

5. If you ask for it from more than one, do you give the offerors a common date and time for submission?

6. If you ask for a price breakdown after submission of proposed prices, how can you be sure that the offeror hasn't broken the price down differently than it did when it developed the proposal that it submitted? How do you know that it hasn't changed something? If the GAO asked you that, what would you say?

7. You say that you have not heard of any problems. Does that mean that there weren't any? Has the procedure been tested in a protest?

8. In your experience, in roughly what percentage of procurements has the government requested supplemental information?

Joel:

You wrote:

In my opinion, there is no value added to the source selection or task order evaluation process by deciding to conduct discussions to see if there really is a need to conduct further pricing discussions. It adds time and extra effort to the process, which may not be necessary. Asking for information, in essence as clarifications, allows the government to focus attention on those areas that stand out as significant differences between offerors/proposers and between offerors/propers and the government's estimate. Sometimes we discover busts in the IGE and sometimes we discover problems with the government's requirements. If we need to conduct discussions, we are are more informed and more prepared to explore those areas. I've sat in on discussions where this wasn't done and the government team looked like dummies. Then extra time was spent asking for and getting the information necessary to evaluate and continue discussions.

I think your remarks reflect an old fashioned view of discussions, which is that they are mainly for disclosure of deficiencies and weaknesses in proposals and corrective proposal revision. Your view is further reflected in your one-liner in Post # 12:

You don't conduct discussions until you determine where the differences are. Until then you don't have anything to discuss.

I disagree. I think that in acquisitions for complex supplies and services discussions should be conducted with offerors in the competitive range to ensure a common understanding of prospective contract terms, even if there are no deficiencies or weaknesses in a proposal. I think they should be used to determine whether there are any differences, since that is not always apparent from an evaluation of proposals. (If we have learned anything about contract formation, we should have learned that.) During discussions the CO should go through the specification or the statement of work and make sure that the parties understand it the same way.

I think discussions should be a standard part of every source selection for complex supplies or services. I know this will add time to the source selection process, but it will save time and money later. Time would be better served by reducing the number of evaluation factors and eliminating useless proposal content. COs should be trained to conduct discussions effectively and appropriately. If in your experience you saw people who conducted discussions in a way that made them look like dummies it is probably because they were dummies.

DOD policy is consistent with my view. See DPAP memo dated 4 March 2011, "Department of Defense Source Selection Procedures," Atch. p. 20, para. 3.3.2:

The process of engaging with industry after proposal submission affords the Government the opportunity to effectively understand and evaluate a proposal and permits industry the opportunity to clearly explain any aspects of a proposal that appear to be deficient, ambiguous or non-compliant. Such dialogue leads to more efficient, effective and improved source selections. Therefore, award without discussions shall occur in only limited circumstances.

Emphasis added. See also DPAP memo dated 8 Jan 2008, "Improving Communication During Source Selection":

[C]ontinuing this process of engaging with industry after proposal submission affords the government the opportunity to effectively understand and evaluate a proposal and permits industry the opportunity to clearly explain any aspects of a proposal that appear to be deficient, ambiguous or non-compliant. Such dialogue can only lead to more efficient, effective and improved source selections.

See too OFPP memo dated 2 Feb 2011, "Myth-Busting": Addressing Misconceptions to Improve Communication with Industry during the Acquisition Process," Atch 1, p. 7:

Misconception - "Conducting discussions/negotiations after receipt of proposals will add too much time to the schedule."

Fact - Whether discussions should be conducted is a key decision for contracting officers to make. Avoiding discussions solely because of schedule concerns may be counter-productive, and may cause delays and other problems during contract performance.

I doubt that very many commercial firms would award a contract for any but the most simple purchases without spending time in discussions to ensure that both parties understand each other's terms and pricing.

I must point out that construction is the most litigious of all government acquisitions. Although a small part of annual obligations are for construction, construction accounts for at least a third to one-half of all board and court decisions. Construction, including 2-phase design build, might benefit from more, not less, discussion. That was my experience when I ran a construction contracting operation for the Department of Energy in the mid-1980s, which is why I banned the use of sealed bidding for our largest projects. During discussions we went through the specs and drawings page by page and sheet by sheet. On more than one occasion we discovered ambiguities, vague terms, and mistakes in the documents. Discussions before contract award saved us a lot of time, money, and paperwork. The design personnel and the contractors thought the process to be very worthwhile. We found things in the specs and drawings that we decided to change by RFP amendment, greatly reduced the number of claims arising out of the specs and drawings from what we had experienced using sealed bidding, and avoided disputes entirely.

You and I have disagreed about discussions in the past and we will undoubtedly continue to disagree. I doubt that we'll ever find common ground. We disagree at least to the extent (a) that you think discussions are mainly for pointing out deficiencies and weaknesses and for proposal revision in order to eliminate them and ( that you oppose full disclosure discussions. I'm sure that others share your views. Perhaps most COs do. Nevertheless, my views are more consistent with DOD and OFPP policy and, in my opinion, sound practice.

Vern, what on earth are you talking about? Where did I say that discussions are mainly for pointing out deficiencies and and for proposal revision in order to eliminate them? If i did, it was unintentional. I totally agree with you about the value of both technical and price discussions. I love discussions. I have used them to save millions of dollars on some source selections by finding mutually acceptable solutions, eliminating the need for contingencies , finding design alternatives, etc.

The point I'm trying to make is that one goes into discussions with enough information to intelligently explore problem pricing areas. We develop a uniform format to ask for the price breakdown information during the price evaluation process to help define the areas of probable pricing differences or problems with the estimate or RFP. Then we look for possible problems with the requirements before going into discussions. It speeds up the process by being better prepared to conduct effective discussions. We first determine if there are problems that require discussions.

One could liken this concept to researching various car models and options, researching prices, establishing your objectives - then go to the dealership and sit down to negotiate, vs. sitting down to discuss what's available and pricing with no advance preparation.

Its the timing of obtaining the information that I addressed. We reserve the right to ask for it as a clarification in order to aid the price evaluation process. Its more effective having the information and having the opportunity to compare the proposals with each other and with the estimate than going into discussions cold.

I indicated in post #7 where FAR Part 15 allows this in the source selection process. We don't need to have an agency policy or regulation to comply with FAR.

When I said "You don't conduct discussions until you determine where the differences are. Until then you don't have anything to discuss", i was referring to the timing of obtaining the price breakdown information. The original poster mentioned deciding to conduct discussions, which requires establishing a competitive range, then asking for the information either during discussions or just before discussions.

I'm saying, ask for it during the price evaluation process, if needed - which is consistent with the guidance in the references in my post #7.

Joel:

You wrote:

In my opinion, there is no value added to the source selection or task order evaluation process by deciding to further discussions to see if there really is a need to conduct further pricing discussions.

That is where we disagree. Of course a party should go into discussions fully prepared. But I think that there is value added by discussions that are conducted to see if there is a need to discuss price or anything else. I see discussions as a process of discovery as well as of bargaining. (So do DOD and OFPP.) Good discussions include a search for understandings and interpretations that may not be apparent in proposals or discoverable through proposal evaluation. You don't want to discuss if there is no apparent need to discuss. But how can you possibly identify all of the possible problems with requirements and proposals without talking to the other party? I want to discuss to find out if there is a need to discuss further. The differences between you and me are fundamental and substantial. If that's not true, just say so.

Also, if you want a price breakdown to "help define the areas of probably pricing differences," why bother with the supplemental price breakdown approach? Since you are concerned about needless delay, why delay getting the information? Why not ask for the breakdown with the proposal in the first place?

Finally, you say:

We don't need to have an agency policy or regulation to comply with FAR.

Where did that come from? I don't know what that means.

What a great discussion from both of you gentlemen.

In my limited constructoin experience with the National Guard, I can tell you that there appears to be some agreement between the process that Joel mentioned and what I has been distributed to the masses in the form of templates and guidance. Unlike the process that Joel mentioned, we typically ask for the supplemental price breakdown on an AF3052 Construction Cost Estimate Breakdown or an equivalent document. I agree with Vern, in that it would make more sense to have the offerors prepare it as part of their initial proposal, versus asking for it at a later date.

In regards to whether or not to conduct discussions, it seems like it is the common philosophy to award without discussions whenever possible, at least in many operational Air Force contracting squadrons and National Guard contracting offices. I was surprised to see that the Department of Defense Source Selection Procedures encouraged discussions, and even went as far as to say that they are the rule and not the exception.

I think that a significant number of contracting professionals, or at least those of us who are less experienced and unfamiliar with GAO case law, tend to shy away from discussions for the fear of a protest. It might be the process of conducting discussions that we need to become more comfortable with, not the actual discussions themselves. I am not saying that I want to establish a range and conduct discussions for every project that comes across my desk, but I do think there is tremendous value in having frank and open discussions with offerors.

Here is another question just for the purpose of picking your brains, especially those with heavy design-build experience. When soliciting offers for with a nominal criteria RFP (15% design), is there less of a reason to open discussions since there is significant design control on the contractor's side, thus mitigating the potential ambiguities found in design bid build? I am curious on how the use of design-build procedures effect the use of discussions, if at all.

Once again, thanks to everyone for their contributions to this thread and patience with my questions.

My computer will not allow me to grab a quote from my last post, but I did want to revise my question about design-build.

What I was attempting to ask is, whether or not there was less reason to open discussions for a design build solicitation that has minimal design requirements, versus a solicitation that has a full design, such as that found in traditional design bid build. The difference being the volume of detail provided between the two, and thus the associated potential for errors on either side (ambiguous specs or erroneous interpretation).

Thanks!

In regards to whether or not to conduct discussions, it seems like it is the common philosophy to award without discussions whenever possible, at least in many operational Air Force contracting squadrons and National Guard contracting offices. I was surprised to see that the Department of Defense Source Selection Procedures encouraged discussions, and even went as far as to say that they are the rule and not the exception.

I think that a significant number of contracting professionals, or at least those of us who are less experienced and unfamiliar with GAO case law, tend to shy away from discussions for the fear of a protest.

Bingo. That's precisely the case. Discussions can be trouble if the CO does not know what he or she is doing, and they do take more time, so most agencies are happy to award without them, which is too bad. Even if they do conduct discussions, most agencies severely limit the content of to communication of deficiencies, weaknesses, and the price amount (too high or too low). I have no hope of changing that.

I'll leave the design-build question for Joel, who is our local expert. But I will say this: the ultimate goal of contract formation is to produce a meeting of the minds and mutual assent. The question is whether face to face talk improves the "quality" of the agreement. I think it does, whether you have "full" specs or only partial. I do not think that paper communication is enough for complex undertakings between parties that are essentially strangers to one another. In many if not most cases the parties begin their relationship having no idea what they have gotten themselves into.

1. We used to ask for the breakdown with the proposal but found that it was not effective to ask for it to be delivered with the proposal for the reasons explained above. It was very effective when we asked for it to be furnished within three working days of the proposal submission date. That allowed the proposers/offerors the chance to properly breakdown the information. We provided the format in the RFP. The reason we don't do that any more is that we don't always need the data. So we don't want to needlessly task proposers to automatically furnish it. We decided to reserve the right to ask for it. If you are strapped for time, it is certainly ok to require it to be furnished a couple of days after the proposal submission date.

2. I strongly encourage discussions for D-B contracts and task orders, including bargaining for better performance, finding solutions to price and technical problems, clarifying anything we think isnt clear, etc. I hate it when KO's and/or PM's try to avoid discussions for the sake of some unrealistic schedule or in the belief that we don't conduct discussions if we have a proposal "without deficiencies". In fact, I was chided by the Webmaster and by a very prominant WIFCON poster two months ago in another thread for not creating a Blog to expand on my viewpoint. I feel that, in design-build, discussions are almost always fruitful and that we should bargain for better performance if we arent completely satisfied with even a conforming technical proposal. Of course, that applies to solicitations that use the Trade-off method. In an LPTA, price is paramount consideration. We can't pay a dollar more for a higher priced proposal that offers anything more than compliance with the minimum RFP requirements.

3. A D-B solicitation using LPTA, usually includes a highly prescriptive, "full-criteria" level of preliminary government provided design. The D-B industry derisively refers to this as "draw-build". Those are typically where you will find more pricing problems that should require discussions. Those solicitations usually severely limit flexibility of the D-B firm. Most, if not all means, materials and equipment choices are prescribed or narrowly limited. If price is the most important factor, I'd think that the government would want to award within the budget.

4. In fact, I'd think that one price objective for any design-build project should be to award within the budget. When using the trade-off method with performance oriented (less design furnished by the government) design criteria are furnished, I feel that we should be looking for the best combination of qualifications and design quality within the budget - not the lowest price.

That's all for now. My wife is visiting me this weekend on my extended TDY assignment.

Joel:

...The differences between you and me are fundamental and substantial. If that's not true, just say so

.

Vern, OK then. That's not true. You may not have read where I advocate meaningful discussions in posts #16, 18, 19, 22, 23, and 28 above.

You may recall in another thread that you challenged me a few months ago to write an article in a Blog. You said I should detai my views on the necessity to conduct meaningful technical and price discussions for construction and design-build source selections or task order competitions. I advocate emphasis on getting the best deal for the government. I complained about an observed reluctance of some PM's/KO's that is apparently widespread in various agencies to provide time for and to conduct discussions. When they do, they are sometimes shallow. In particular, I advocate conducting price discussions and/or conducting technical discussions when there is an otherwise awardable proposal that could be better. Such discussions are also appropriate for proposals that may be technically compliant but contain some objectionable or unneccessary features. I advocate bargaining for better performance. I described differences between pre and post 1997 versions of FAR Part 15, which encourage this approach.

The point I've constantly and consistently made in this thread, is that I have found it is more effective and efficient use of time to obtain and use the price breakdown information as part of the proposal price evaluation process - before establishing the competitive range and prior to discussions. It is also useful for determining which firms to include in discussions. Don't wait for negotiations to ask for it. I successfully used this approach for many years. It has been included in a Model RFP that has been used for billions of dollars worth of Army D-B MILCON projects since 2006.

...Also, if you want a price breakdown to "help define the areas of probably pricing differences," why bother with the supplemental price breakdown approach? Since you are concerned about needless delay, why delay getting the information? Why not ask for the breakdown with the proposal in the first place?.

You may have not read in posts #4, 7 and 28 where I explained that price breakdowns furnished at the time of proposal submission for construction and design-build projects are of little value - that it is more effective to allow proposers about 3 working days to submit it. I also said that this information isnt always necessary. In consideration of the effort and cost involved to industry to prepare this information, we decided to reserve the right to ask for it. We can easily and quickly obtain it if needed during the time set aside for proposal evaluation. If time is critical, then require in the RFP for proposers to submit it 3 working days after initial proposal receipt.

...Finally, you say: "We don't need to have an agency policy or regulation to comply with FAR." Where did that come from? I don't know what that means.

I was replying to your question in post number 17:

"Is the procedure described in an agency regulation, policy issuance, or manual? "

The procedure is compliant with the policies expressed in FAR 15.402 (a )(1), 15.403-1 (b ) , and 15.403-3, as I initially identified very early in this thread in post #7. There is no need to add supplemental agency policy to use such wording in an RFP.

Sorry that I overlooked your specific questions in your post #20. Perhaps you edited your original post - who knows.

I answered most of them already. Yes, provide a common cut-off in the letter/email requesting the supplemental breakdown. There were no compalints by industry during the years that I personally led the construction and D-B source selection process. We have Corps-wide feedback systems for requesting revisions to the Model RFP. I haven't seen any negative feedback on this practice since the RFP was published in 2006. If the GAO decided to take an intererest in it, I'm sure that we would respond appropriately, but we haven't been quaking in our boots about it. Proposers are not allowed to change their CLIN prices with the breakdown. Who is to say that they wouldn't manipulate the data if we first ask for it in discussions or with their proposals? We already know that the price breakdown data was of marginal value when it was submitted concurrently with the proposal. I had to explain why several times here.

Whatever. I've had my say.

Thanks for the post Joel.

I do have one question for you. I apologize if I am asking you to repeat yourself.

Why the reluctance to request the breakdown with the initial proposal? What benefit does three additional days provide to the contractor? Isn't there proposal backed by sufficient estimation prior to submission? I were to receive a proposal and found out that the contractor was not in a position to also provide a complete breakdown at that time, I would be a little concerned.

I would like to hear you elaborate on this. Maybe I am just not fully understanding the detail of the breakdown or how the three days benefits the contractor.

Thanks!

Micah, thanks for the prompt. I found the original post where I explained why price breakdowns furnished with the original construction or design-build price proposals weren't very meaningful. Here it is with some added clarification.

We began in the late 1980's asking for a high level price breakdown with the proposals. But we found that the information often didnt make sense or add up to the CLIN prices. During discussions with a couple of the proposers' reps, they indicated to me that they dont have any problem with furnishing such information. However, they werent in a position to accurately break down the final numbers prior to proposal submission because they were still finalizing the pricing up to the last minute.

Construction contractors often hand deliver their pricing proposals separately from their bound technical pricing We've often observed the proposers' reps on cell phones outside the Federal Building, making last minute revisions to their pricing. Or they sometimes send in the price envelopes through FEDEX or equivalent at the last moment possible It takes time to breakdown pricing of each lump sum CLIN. Examples of CLINS may be: each separate, lump sum building as well as sitework and site utilities. For design-build, we often include a CLIN for the Design, where "design" is defined in the CLIN schedule notes.

The CLINs may be broken down into a government provided Work Breakdown Structure, such as building shell, mechanical, electrical, special features, architectural finishes, etc. Those WBS lines are further broken down into columns for total labor, total materials, total equipmentr, subcontracts and overall markups This isnt something that a proposer can just fill in at the last minute after finalizing its pricing. Price has to be hand delivered. Or it is run over to or picked up by FED EX, DHL, etc. It isn't particularly difficult to do, because the firms do this anyway in their spreadsheets. We dont ask for manhours, labor rates or crew sizes, individual material pricing, equipment lists, etc. The uniform format makes it easy to compare proposals and compare with the Government's IGE.

The contractor reps that I used to deal with suggested allowing proposers a couple of days to break down the information and provide it. They said that they would be able to greatly improve the quality of the info provided. We then changed our method to RFP language requiring that the price breakdown information be provided within three working days after the closing date for proposal receipt. We said no changes to the proposal prices or CLINs were allowed.That worked great for us. The quality of the information was indeed greatly improved.

However, on many occassions we didnt need the information. In those instances, we realized that we were making proposers sometimes go to extra effort and expense for no purpose. We then decided to reserve the right to ask for the information, if necessary. We ask for the information when there are questions concerning pricing. This has worked very well in helping to determine if we need to conduct price discussions. And it helps us find those areas of pricing disparity to probe during discussions. Discussions have been much more meanginful and productive. We've discovered how to eliminate or reduce contigencies for poorly crafted or risky requirements, unclear requirements, wasteful requirements, etc. Since the price analysis team conducts the price analysis concurrently with the technical teams' analyses, this doesnt really add much, if any time to the SS or task order evaluation process.

Micah, you asked:

Thanks for the post Joel.

"..Isn't there proposal backed by sufficient estimation prior to submission? I were to receive a proposal and found out that the contractor was not in a position to also provide a complete breakdown at that time, I would be a little concerned."

Thanks!

They have the information but there are occassions where the boss tells the PM or estimator at the last minute to make across the board cuts, cuts to certain CLIN's, etc. Subs or suppliers may provide last minute price revisions. One cant easily go back and edit the price breakdown or even calculate the individual adjustments on the fly. They've got to get the proposal in.

The current construction bidding climate is cut throat - firms are taking huge cuts just to stay in business or to keep their business and management staffs. These are tough economic times for the design and construction industry.

By the way - I don't recommend using LPTA design-build projects, unless they are "draw-build" projects. And those probably shouldn't be issued as design-build, either.

The contractor reps that I used to deal with suggested allowing proposers a couple of days to break down the information and provide it. They said that they would be able to greatly improve the quality of the info provided. We then changed our method to RFP language requiring that the price breakdown information be provided within three working days after the closing date for proposal receipt. We said no changes to the proposal prices or CLINs were allowed.That worked great for us. The quality of the information was indeed greatly improved.

That does not make sense. They develop the breakdown after they set the price? So they do not build the price up from scratch? It sounds to me that they develop a post hoc rationalization of something they developed in some other way. The breakdown does not reflect a cost buildup, but an after-the-fact allocation of costs. You say the quality of the information was greatly improved. How so? Content or format? I can see format changing for the better, but not content, unless the content is created after the fact.

The content was improved. We provided the format. They didnt have the time to edit all their data, plus cross reference and match our format.They concentrated on pricing in accordance with their formatted estimating systems.

If their estimating systems produced the content, why didn't they have enough time to edit and format it the way you wanted it? Was it because you did not give them enough time? And in what way was the content "improved" after their estimating systems produced it? Did they improve it or embellish it? Improve it or doctor it?

We arent asking for a cost proposal. Contractors have their own estimating systems, formats and technical approaches, which may or may not conform to the layout of the government's format. when pricing is dynamic up to the last minute, it just cant be swiftly broken out and transferred over to another format.

Whatever. I've had my say.

I'm not arguing with you about discussions.

I think what you have said about your procedure is interesting, because it may tell us something about the nature and merits of the cost breakdowns you receive. What you said suggests to me that the breakdowns you receive do not necessarily reflect how the prices are developed, how they were built up from scratch. It may not shed full light upon the cost estimating process. What you have said suggests that the breakdowns are, at least in some measure, after-the-fact rationalizations of the proposed prices.

If you claimed that giving the offerors more time to submit the breakdowns allows them to merely reformat their information, that would be one thing. But you say that it allows them time to give you better content, and that strikes me as something else. I'm not sure what. My understanding of your use of the word content may be faulty, I don't know, and I don't know if it matters with respect to source selection procedure, but if raises interesting questions about the procedure that you are using to understand the prices that you receive. I am not saying that the procedure is unsound.

I understand, however, that you do not want to talk about this anymore.

Thanks gents.

I appreciate the elaboration Joel.

Micah, you are welcome.

Vern, I'm trying to say (not very well) giving the offerors more time to submit the breakdowns allows them to reformat their information. We aren't asking for a cost proposal. Contractors use their own estimating systems, methods and procedures.

Also, subs and suppliers routinely submit prices that cover several of the specific "lines" that we are interested in. Its hard enough for a proposer's team to sort this out among different CLINS, let alone break it down into our specific format. That's all I'm trying to say.

And yes, sometimes we discover unbalancing between CLIN's through examination of the breakdowns that may or may not be deliberate. Having discussed that with proposers, I feel that, due to the time pressure to get the price proposal finalized and submitted on time, theysometime incorrectly break out their subs' and suppliers' quotes between CLINs or allocate to the wrong line on our format within the same CLIN . This reminded me of occassions where, during discussions, proposers would sometime thanks us for catching those errors and they re-allocated the costs to the correct CLIN's in the revised offers.

I guess that I could sometimes spot these apparent errors or unbalancing from my background in construction contract admin and experience in negotiating mods, claims and new sole source acquisitions. Contractor's estimating systems and formats dont always mirror those used by our estimators. In addition, the estimators and the various proposers dont necessary use the same "make or buy" approaches (some self perform things that other subcontract out and they use different construction approaches). Some allocate specific work between different subs. Our estimators base their estimates on a certain approach that might not be the same as the industry. I guess that's why they are called "estimates" and why there are differences between bottom line prices.

Again - we aren't asking for detailed cost proposals - only high level price breakdowns of the CLIN''s to help us see where they put the money. It's a lower level price analysis but not a cost analysis.

I'm rusty now at cost and price analysis. However, I have been on a long term TDY assignment to negotiate a very large acceleration mod that includes settling the time impact of numerous changes and other causes. I've had to dust off and use my technical, cost and price analyses hats once again...

Hope that helps clarify why it is better to allow the proposers a couple of days to sort out their price breakdowns. Please believe me when I say the price breakdowns made much better sense after we started doing that. Dont read too much into ulterior motives, etc.